Osita Chidoka Breaks Down VAT Reform, Cautions South-East: “VAT Belongs to States, Not Traders”

Former Chairman of the Federal Road Safety Commission (FRSC), Mr. Osita Chidoka, has weighed into the ongoing national debate on Value Added Tax (VAT) reform, dismissing claims that VAT contributions should be assessed based on the ethnic identity or geographical spread of traders.

In a detailed analysis shared on social media and monitored by Economic Confidential, Chidoka stressed that VAT allocation in Nigeria is based on states where transactions are formally captured and remitted, not on where traders originate or where ethnic groups dominate commercial activity.

Responding to arguments that Igbo traders operate extensively across Nigeria and therefore contribute disproportionately to VAT revenues, Chidoka clarified that VAT does not track people, ethnicity, or ownership of capital, but rather the location where economic value is formally recorded and taxed.

“Even if a South-Easterner creates value in Kano, Lagos, or Port Harcourt, VAT is booked and remitted to states, not ethnic groups,” he explained, adding that VAT measures structure and formalisation, not enterprise presence.

Presenting 2024 VAT figures, Chidoka noted that the South-East contributed ₦101.09 billion to the VAT pool but received ₦341.46 billion, representing a return of over 337 per cent. According to him, the funds were allocated to the five South-East states—Abia, Anambra, Ebonyi, Enugu, and Imo—not to individuals or traders operating outside the region.

He argued that by this measure, the South-East remains a net beneficiary of Nigeria’s VAT redistribution framework.

Chidoka further explained that the pattern is not unique to the South-East. In 2024, the South-West contributed about ₦3.11 trillion to VAT revenues but received ₦849.71 billion, while the South-South contributed ₦1.08 trillion and received ₦543.49 billion. In contrast, the North-West contributed ₦211.27 billion and received ₦574.32 billion, the North-East contributed ₦174.50 billion and received ₦411.84 billion, and the North-Central states contributed ₦154.54 billion but received ₦408.66 billion.

According to him, the figures reveal a VAT system that redistributes revenue from a narrow production base to the rest of the country, highlighting what he described as a national production deficit rather than regional economic dominance.

Chidoka also examined the implications of the proposed VAT reform formula, which allocates revenue based on 60 per cent derivation, 20 per cent equality, and 20 per cent population. Applying the formula to 2024 data, he estimated that VAT receipts for the South-West would rise from about ₦850 billion to over ₦2 trillion, while the South-South would increase to roughly ₦850 billion. In contrast, South-East receipts would decline from about ₦340 billion to approximately ₦220 billion.

He added that while the North-West would experience only a modest decline due to population weighting, the North-Central states—excluding the Federal Capital Territory—would face sharper reductions as redistribution thins.

Chidoka acknowledged concerns that VAT data does not fully capture informal economic activity, particularly in the South-East, but described this as a structural weakness rather than a flaw in the data.

“An economy that is vibrant but informal is not strong,” he said, noting that informality limits a region’s ability to fund infrastructure, build industrial capacity, and maintain fiscal resilience.

In his concluding remarks, Chidoka urged Nigerians to separate debates around ethnic enterprise, regional economic strength, and VAT allocation. While acknowledging the widespread presence of Igbo entrepreneurs across the country, he maintained that state-level economic performance depends on industrialisation, power supply, logistics, security, and the formalisation of businesses.

“Presence is not production, and VAT does not reward identity—it rewards structure,” he said, describing his intervention as his final contribution to the VAT reform discourse.